SWEETS AND SOURS OF SOCIAL BUSINESS: A CASE STUDY ON ...

Table 2: Population Distribution by Broad Age Group in PercentageAge GroupNo. ofPopulationPercentage0-4 years 16002 12.875-9 years 16696 13.4310-14 years 15872 12.7615-24 years 23212 18.6725-59 years 44843 36.0660 + years 7729 6.22Total 124354 100Source: Statistical Yearbook of Bangladesh 2007} 39.06%The People’s Republic of Bangladesh is a country in South Asia with an area of 147,570 squarekilometer. Total population of Bangladesh is 151 million. There are seven divisions: Dhaka,Chittagong, Khulna, Rajshahi, Sylhet, Barisal, and Rangpur. The 2001 census counted andreported Bangladesh population 124,355 thousands. At that time, Rangpur was in the Rajshahidivision and Bogra Zila was under Rajshahi division too.Market Segmentation and Targeting: The company segmented its market onthe basis of geo-demography. Geographically it first selected Bogra district which has an area of2898 square kilometers, household 688000 and a population of 3013 thousands. From the abovetable no. 2 it is noted that children under 14 years are 39.06% of the total population whichestimates the segment size at 1177 thousands. The segment was also selected demographicallykeeping low income in mind.Table 3: Number of Members, Earners, Household Income, Income per Member andEarrner by Residence in 2005ResidenceNo. ofmember perhouseholdNo. ofearner perhouseholdMonthlyhouseholdincome perhouseholdMonthlyincome permemberMonthlyincome perearnerNational 4.85 1.4 7203 1485 5145(100.74) (20.77) (71.96)Rural 4.89 1.37 6095 1246 4449(85.24) (17.43) (62.22)Urban 4.72 1.5 10463 2217 6975(146.34) (31.01) (97.55)Source: Bangladesh Bureau of Statistics May 2007*Data within parentheses indicates information in USD.Table 4: Percentage share of food expenditure by residence & major food items in 2005% ofTotal Cereal Pulses FishMeat&EggsVeget-ablesRural 42.25 2.39Source: Bangladesh Bureau of Statistics May 2007Milk/milkprod-uctsEdibleoilCondim/spicesSugar/ gurBeverageFruits11.46 7.64 8.34 3.46 4.07 7.18 2.97 1.54 0.452

Analyzing above table no. 4 it is seen that milk/milk products are consumed only 3.46 percent ofall other food expenditures. In reality, there is only one earning member per household at Bogra,thus leaving only Taka 43.11 (From table 3, considering Taka 1246 per earner’s income) which isequivalent to 7 cups only in a month per household which brought the big challenge to GDFL.Current View of Products and Pricing: In February 2007, GDFL sold its first 80gram cup of shoktidoi, which provides 30% of a child’s daily requirements of vitamin, iron, zincand iodine at a price of Taka five and in USD 0.07 1 . (Currency Conversion 1 BDT = 0.014 US$) 1 .By September 2007, GDFL was selling around 350,000 cups per month. But, in April 2008, theprice of raw material especially cow’s milk increased by almost 100% from Taka 22 ($0.307) toTaka 40 ($0.56) per liter. As a result, sales price per 80 gm cup was increased to Tk. 8 ($ 0.11),affecting a sharp decrease in sales and collapsing the sales network of Grameen Danone Ladies.GDFL decided to make 60 gm cup at a price of Taka six ($0.84) maintaining the same nutrient.The company also decided to expand sales to Dhaka and thus in November 2008 it began tosend a refrigerated truck to Dhaka twice a week. The product it sent to Dhaka was an 80 gramcup priced at 12 taka ($0.17). With the increase in milk price, GDFL decided to expand its productlines.Table 4: Price and Volume (in Percentage) of Shoktidoi Offered:Plain + Protein60 gm (Sept2009)Pouch 40gm (May2010)Products inCup Plain 60 gmMango 60gmPlain 80gmMango80 gmRural, Care Rural, CareRangpur, Rangpur, Dhaka Slums,Dhaka,North & North & Dhaka, Dhaka, Chittagong,Selling West West Chittagong ChittagonAreas Bangladesh Bangladesh and Sylhet g, Sylhet Sylhet RuralPrice inTaka 6 8 8 12 12 5in US $ 0.08 0.11 0.11 0.17 0.17 0.07% Volumesales in thePortfolio incups (YTDMarch2010)63 4 28 4 2 _Current View of Distribution and Promotion:GDFL relied on a “two-legged stool” to distribute and sell Shoktidoi. One leg was a number ofsmall retail stores (between 300 – 400) located in and around Bogra but lacks of refrigerators.The second leg was the “Grameen Ladies.” These were female entrepreneurs who took loansfrom Grameen Bank and used the money to start or expand small businesses to supportthemselves and their families. They were trained and informed about the benefits of Shoktidoi,provided with insulated bags in which to carry the yogurt containers from door to door. GDFLplanned to pay a sales commission Taka 1.50 ($ 0.02) per cup sold. Product nature and thecommission system could not motivate sales ladies to stick to selling rather than quitting withoutword of explanation. It happened for two reasons: 1) if they could not sell, GDFL would not havetaken it back and 2) density of population in rural area is not as high as that of the metropolitancity area which we generally consider. These ladies had to carry and walk miles away to sell afew and return home. They could not preserve these unsold in their homes as well as they had no1 Throughout the case the currency conversion is used: 1 Bangladeshi Taka equals USD 0.014.3

efrigerators or in some places no electricity even. Sometimes, rickshaw vans and motorizedvehicles were used to carry these to different retails outlets. Grameen Danone Ladies accountedfor about 20 percent of Shoktidoi sales, the remaining 80 percent of sales were carried out atshops. (Rangan and Lee, 2010)Dhaka City: Dhaka is the capital of Bangladesh with an area of 304 square kilometer but thepopulation is 7 million. The density of population in the Dhaka city area only is 23,029 per squarekilometer. Metropolitan city of Bangladesh is the primary place for business people to target astheir market. This gives the business people to take the advantage of high density of populationand minimize the distribution cost.Table 5: Population Size of Metropolitan AreaDhaka Chittagong Khulna RajshahiTotal Population 9672763 3265451 1172831 651062Household 2071946 640691 253215 135216Source: Report of Population Census in 2001Culture and Competitors: Bangladeshi consumers choose between sweets and curd (sweetyogurt) after their meal (not daily though) and after dinner programs with guests, or during somespecial occasions. These curds are widely available in rural and urban areas either in plasticcontainer (in the city area) or in clay-pot. Per capita total curd availability was 30,000 Metric Tonsin 2005-06. (Statistical Yearbook of Bangladesh 2007) These curds are sweeter than shoktidoiand stay longer in the clay pot without refrigeration.There are local yogurt / sweet curd (misti doi) sellers in Bangladesh. Some are very renownedlike “Premium Sweets”, “Rosh”, “Exclusive” etc. where price per kg ranges between BDT 150 toBDT 250. These sellers have their own sweets outlets in the metropolitan cities of Bangladeshtargeting middle and upper class people. They are exclusively sweet stores. Some mid rangesellers are named “Banoful”, “Alauddin Sweets”, “Bombay Sweets”, “Muslim Sweets”, “MoronChad”, “Vagyakul” etc. Apart from these high and mid range sellers, there are many low rangelocal yogurt sellers. They also have their sweets outlets (like mom & pop store) in rural and urbanareas. Most of these sellers sell 1kg or ½ kg packaged yogurt. Traditionally yogurt or curd ispurchased on a family basis, and thus big size makes sense.Table 6: Name of Competitors and Offered Package SizeName of Competitors Price (Taka)/ Kg Price (US$)Premium Sweets 250 3.50Rosh 200 2.80Exclusive Sweets 200 2.80Vikrampur Mistanna Vandar 160 2.24Tangail Mistanna Vandar 160 2.24Alauddin Sweets 140 1.96Muslim Sweets 140 1.96Banoful Sweets 160 2.24Modhubon Sweets 120 1.68Vagyakul Mistanna Vandar 140 1.96Moron Chad 140 1.96There are many unnamed rural stores that sell yogurt from their sweet stores. Almost 90% ofthese stores sell 1 kg or ½ kg packaged yogurt assuming that yogurt is a family purchase. Buyersare not at all aware about the nutritional levels of these sellers’ offer. They only care about thetaste and its thickness. Local yogurt is a bit thicker than the one Danone makes in Europe.Packaging is also a bit different from the plastic or paper packaging. They use “clay-pot” (which ismade and supplied by local potters) for packing. There is a positive side of such packaging. Thispot soaks the water of the yogurt and keeps it thick, cold and gives yogurt a nice look. Beforegiving this 1 kg pot to the rural buyers, the sellers cover the top of the pot with a thin plastic and4

tie the pot with a rope. Before giving this to metropolitan city buyers, after covering the top of potusing plastic, they put the pot in a hard paper box.Challenges: Because of the production started in Bogra and the distribution throughGrameen Shokti Ladies, the sales were mostly convergent to Bogra district or Rajshahi division.At the initial stage, the idea was to sell only to low income group to meet their malnutrition.However, the reality in Bangladesh is that the malnutrition even exists in the capital city Dhaka assimilar to that of Bogra. Thus, the company decided to open another production plant nearDhaka.The challenges company may face:- Target Market: As stated, Dhaka is a lucrative market to enter but whom to target?As shoktidoi was initially made for children, therefore, a good idea would be to tap theschool children and their mothers of metropolitan city. Both public and private schoolsstudents should be the primary market. Parents are highly concerned about their childrenin metropolitan cities where most of the foods are adulterated. They want to meet up theirchildren’s daily nutrient deficiencies. Another challenge is, should GDFL target only thechildren between 1 and 14 years old or older consumers as well? These group can betapped by the family offers (1kg or ½ kg) meeting their nutritional requirements. Theyshould position the nutritional level of shoktidoi and tap emotions of mothers or head ofhouseholds.- Products: Analyzing the local culture and competitors offer, it is suggested thatGDFL should sell shoktidoi in one kg of half kg container. They should remember thatyogurt is a family purchase in Dhaka city and almost all houses are furnished withrefrigerator. They may use their recycled plastic container similar to those is mostly usedby renowned “Premium Sweets”, “Rosh” and other competitors. One advantage GDFL isobviously getting is its joint venture image, where the other competitors are lacking.GDFL may use the foreign country image “France” with the brand. Mothers have morefascination and faith toward the foreign country brand and the products purity. GDFLplanned to use the existing packaging or introduce a new sachet (small packet) of 40grams at a price of Taka 5 in rural areas. One danger to introduce this small sachet is thenegative perception of consumers toward its hygiene especially in Dhaka city. Asmetropolitan city and other rural parts of Bangladesh are completely dusty and thesesachets are planned to sell through local grocery stores, therefore, there is a highpossibility of dusty package to be served to customers. This may create a negativeimpact in consumers mind. In Bangladesh, at present, shampoo, oil, toothpaste are sold,but hardly any liquid food items are sold in sachets.- Supplied Milk and raw materials: Till to date, GDFL is manufacturing itsyogurt using local milk collected from micro farms located near the plant. In April 2010there were 370 micro-farms, each had between two and five cows. Grameen Danonealso collected milk from a larger farm, ICMSE 2 , which employed integrated farmmanagement practices. In April 2010 ICMSE’s 70 cows provided milk to the Bogra plantand the farm staff provided the micro-farms with technical assistance and training(Rangan, Katharine 2010). To minimize its cost of production and to increase itsacceptance in the market, should the company think for whole cream milk powder as analternative source? At 2.11 million tons, milk production in Bangldesh in 2002 wasrelatively low, and Bangladesh has to import around 250,000 tons of milk (Hemme,Garcia, and Khan 2004). Low production results in the import of bulk amount of powderedmilk. Bangladesh spent about Tk 1,500 crore to import 42,583.46 tonnes of powdered2 ICMSE is an International Platform for microfinance and SME Development and promoting socialbusinesses for fighting poverty and improving living condition of the low income population.5

milk during the last fiscal year, said Tureen Afroze of United Nations IndustrialDevelopment Organisation (UNIDO) in the Daily Star (2008).- Pricing: Tk 12 for 80 gm container may be justifiable in Dhaka city where as Aftab doiand Akiz doi are sold at a price of Tk 15. If GDFL introduces half kg at a price of Tk 70and one kg at a price of Tk 120, then there might be a competitive advantage to capturethe market in Dhaka city. School children will always compare Small quantity of shoktidoiwith other available substitute at a price of Tk 12. For example, Tk 12, these children maytaste lassi (a sweet yogurt drink of 200 ml) and get more pleasure than spending it for a80 gm container. Or at the same price they may purchase ice cream hiding from theirparents. Poor people may buy 180 ml of milk to drink for meeting their nutritionalrequirements at taka 6 in stead of spending for yogurt.- Distribution: It will still be a challenge for GDFL to sell yogurt in Dhaka city. Onlysome department stores and some renowned super markets named “Agora”, “Nandan”,“PQS” etc and some other local very renowned small stores keep yogurt. Othercompetitors sell through their own outlets with other variety of sweets. GDFL should not0pen any outlet of its own rather may keep refrigerators in each of its Grameen PoshakStores (Grameen Dress Stores). Other sellers would be willing to carry these yogurts ifthey are offered more commissions as their profit than selling their own brand!!!Performing a test marketing, GDFL should take any decision to scale up distributionnationwide.- Promotion: GDFL used the image of a “nutritional lion” on all of its products. It alsoheld a number of mini-events and utilized school nutritional program. In 2009 GrameenDanone Foods held 1,270 mini-events in villages and it utilized school nutrition programsto reach 80,000 pupils in the lower economic classes (Rangan, Katharine 2010) Apartfrom these, several TV advertising has already been aired nationwide highlightingproducts through Prof. Yunus. However, as stated earlier, in Dhaka city it isrecommended to highlight country brand image especially “France” name in theadvertising to create brand reliability among mid and high income groups.All these are very tough things to decide. The good part, GDFL still is optimist and is trying torecoup its investment (though still unprofitable and even more negative because of newinvestment). The world is keeping eye on Danone’s first investment on social business and thesuccess of this project is still possible, just need to keep a holistic view before taking any wrongstep. A good market analysis through marketing research is the trigger to its success.6

Questions:1. Before starting any social business, do you think, a country analysis is mandatory oroptional? Reasons your answer.2. If you were in 2007, could you target only Bogra district? Could Dhaka market give you abetter profit result? Do the analysis keeping same plant?3. What is the Management decision problem? What is the marketing research problem?4. Do you suggest opening a 7500 square feet factory building in a metropolitan area ofDhaka city?5. What are the drawbacks of giving 1kg or half kg container shoktidoi? What is your view ofcharging a premium price of Tk 200 per kg? Do you think sachet can be sold in Dhakacity?6. What will be your distribution strategy to sell existing shoktidoi and proposed shoktidoi inDhaka city? Will you recruit sales people on a commission basis or on a fixed paymonthly salary basis- both in rural and Dhaka city market?7. What is your opinion regarding highlighting of country image in promotion? Which tool ofpromotion mix do you suggest should carry more weight? Reason your answer.8. Do you think, marketing research can help GDFL to upgrade in its current position or itwould be a wastage of money adding extra burden to the company.7

ReferencesHemme. T, Garcia, O and Khan, A.R 2004 A review of milk production in Bangladesh withParticular Emphasis on Small-Scale Producers.Lean G. 2008 Year of the hungry: 1,000,000,000 afflicted. The Independent.Available at: http://www.independent.co.uk/news/world/politics/year-of -the-hungry-1000000000-afflicted-1213843.html.Rangan, Kasturi & Lee Katharine 2010 Harvard Business School: Grameen Danone Foods Ltd.,a Social Business.Sultan, Imamus 2007 “Grameen Danone Foods Limited: A Unique Model of Social BusinessEnterprise,” presentation to Japan Microfinance Symposium, July 3, 2007.Yunus, Muhammad 2010, Building Social Business – The New Kind of Capitalism that ServesHumanity’s Most Pressing Needs. Published by PublicAffairs, a member of the Perseus BooksGroup in 2010.Yunus, Muhammad 2007 Creating a World Without Poverty: Social Business and the Future ofCapitalism (New York: PublicAffairs, 2007).Statistical Yearbook of Bangladesh 2007 Pg 539.The Daily Star – Published on 2008-12-06.Gates B. 2008 Making capitalism more creative. Time. Available at:http://www.time.com/time/business/article/0,8599,1828069,00.htmlPepsiCo. PepsiCo 2007 annual report: performance with purpose. Available at:http://media.corporate-ir.net/ media_files/irol/78/78265/2007_AR.pdf.www.dairyindustries.com Grameen Danone opens plant in Bangladeshwww.icmse.org8